By 9:07 p.m. on February 25 it was clear that 1990 would mark a sea change in U.S. policy toward Latin America. At that moment two U.N. computer experts in a windowless room in Managua, processing the earliest returns from Nicaragua's presidential elections, realized that the Sandinista National Liberation Front was heading irrevocably for defeat.

As partial vote tallies were radioed in from mobile U.N. field teams across Nicaragua, the statistical "quick count" initially gave the Sandinistas a wide lead. But as new reports began to fill out the graph on the technicians' computerized projection, the lines representing the contending parties began to waver, then crossed sharply, and finally flattened into an unmoving 13.9-point margin of victory for the anti-Sandinista candidate, Violeta Barrios de Chamorro.

So unexpected was Chamorro's victory-defying the predictions of opinion polls, U.N. observers and even American officials who had sought to bring it about-that the projection was handled with the tense secrecy of a bomb in a crowded theater. As Sandinista crowds gathered in a lighted square just half a mile away for a lavish victory celebration, former U.S. President Jimmy Carter, the most senior member of the combined observer missions, requested an urgent, confidential meeting with President Daniel Ortega Saavedra. Regularly scheduled public announcements of the official government election returns suddenly fell silent. And only at dawn, when a stunned Daniel Ortega conceded defeat over national television, did the electrifying news finally race through Latin America: the Sandinistas had been voted out.

After a decade of bitter American military and diplomatic struggle to uproot the Sandinista revolution, the opposition's sweeping election victory seemed almost too good to be true for U.S. policymakers. Since 1979 Washington's hostility toward the Nicaraguan regime had grown into the single most divisive issue in American foreign affairs since the Vietnam War, yielding the same kind of domestic disaffection and ineffective policies. Moreover the conflict had driven and distorted American relations with Latin America and regions as distant as the Middle East, as the White House searched for the means to justify and act on its obsession. From the rise of Manuel Antonio Noriega to the embrace of the Salvadoran army to the militarization of hapless Honduras, the anti-Sandinista struggle had cost America far more than the funds that were squeezed out for it each year in wrenching congressional battles. At its worst the policy had threatened to destroy the president who promoted it; at its best it had failed to work.

Now, under the eyes of international observers invited by the Sandinista government itself, the Nicaraguan people decided their own future against the Sandinistas. Their decision, furthermore, had come in the aftermath of other spectacular changes that seemed to wipe Washington's Latin American slate nearly clean. From Russia to eastern Europe, the collapse of the Soviet empire removed the communist menace that had given meaningful dimension to the perceived Sandinista threat. And one of the worst legacies of America's reflexive search for anti-Sandinista allies-Panama's General Manuel Noriega-had at last been dealt with and was adjusting to life at a federal detention center in Miami.

Almost as quickly as it came, however, America's good fortune began to dissolve. From Managua to Panama City, the problem of how to displace foes and despots gave way to the equally thorny dilemma of what should replace them. Overnight the drama of confrontation was converted into the longer-term conundrum of effective cooperation.

Even before the new Nicaraguan government was sworn in, it became clear that Chamorro and her small circle of advisers did not fully share Washington's approach to a post-Sandinista Nicaragua. Guided by a vision of new national unity and, not least, by lingering fear of Sandinista power, Chamorro's government yielded broad concessions to the outgoing regime, first in transition talks, then upon the threat of unrest bordering on a new civil war. Those policies then provoked right-wing furor from former contra rebels. By the end of 1990 Chamorro's regime was foundering amid economic and political disarray and the misery of a people whose plight seemed changeable, if at all, only for the worse.

The eclipse of new hopes for Nicaragua was paralleled in Panama, where the elimination of Noriega, the renegade strongman and former U.S. ally, swept away virtually any form of organized government. Nearly a year after the December 1989 invasion, the new regime of Guillermo Endara remained little more than a caretaker administration, lacking the political strength to restructure the country's bloated bureaucracy or even attend to such critical tasks as restarting the paralyzed criminal justice system. Panama's once-vibrant economy began to regain momentum. But its remote jungle docks and airstrips continued to thrive as a transit point for illegal drug shipments to the United States. National business leaders united in a common front against any increased American access to the secret bank accounts that have made the isthmus a clearing-house for tax evasion and money laundering. At year's end, President Endara was forced to rely on American troops to put down a quixotic rebellion led by his former police chief, Colonel Eduardo Herrera Hassan.

The changes in Nicaragua, and the Eastern bloc as a whole, also pulled the foundations from under American policy toward El Salvador, where Washington's $350 million a year stand against international communism has been transformed into a permanent subsidy for a savage, strategically unimportant civil conflict.

Having lost its principal foes, both locally and in the once-grand struggle of ideologies, the United States found that it had also lost its principal anchor and guide in dealing with Latin America. Just as the communist menace had never been sufficient to explain the region's problems, its sudden disappearance proved inadequate to resolve them. In a matter of months Washington's greatest Latin American adversaries became its neediest supplicants, joining a lengthening list of regional nations that had staked their economic hopes-and future political stability-on increasingly scarce American aid.

As had become its practice during the changes in eastern Europe, the Bush administration made quick efforts to capitalize on the propitious turn of events in Latin America, hailing a hemispheric rebirth of democracy and declaring, as President Bush put it in a year-end trip through South America, "The day of the dictator is over." Seeking a new framework for its regional policy, the administration announced its intention to establish a free-trade zone that would extend from Alaska to Argentina and initiated talks toward a bilateral trade agreement with Mexico. Militarily, Washington worked to transform the war against communism into greater firsthand involvement in the war against a more fashionable-if equally elusive-enemy, drug trafficking.

But despite a new regional appreciation for the dominance of American policy in hemispheric affairs, the organizing concepts of U.S. relations with Latin America seemed almost impossible to identify. And money to meet the growing expectations of America's regional friends was in conspicuously short supply.

After a year of remarkable change and good fortune, America therefore entered 1991 looking backward and relieved instead of forward and prepared. With inevitable, perhaps cataclysmic, change on the way in Cuba, continuing unrest in Nicaragua, El Salvador and Panama and uncertain economic prospects throughout the region, Washington's once-acute concern had been replaced with complacency. The newly resonant chords of the Monroe Doctrine seemed to be laced with a mocking descant from Oscar Wilde: "When God wants to punish you, he gives you what you want."

II

As 1990 dawned in Nicaragua, the relationship between the United States and the Sandinista government could scarcely have been more vividly expressed. The fortified, prison-like American embassy in Managua was surrounded by Sandinista tanks and artillery, dug in as preparation and warning against the U.S. attack that Sandinista leaders expected in the wake of the Panama invasion. In a starkly worded official radio announcement the Nicaraguan defense minister, General Humberto Ortega Saavedra, warned that any American action against Nicaragua would be met with the immediate execution of leading opposition figures.

No American military strike, of course, ever came. But for the Sandinistas the months ahead proved to be far more devastating and unexpected than the surprise attack that they had so long braced to repel.

After years of growing international ostracism and deepening economic hardship, Sandinista leaders had concluded in early 1989 that their only hope of escaping America's powerful military and diplomatic stranglehold was through internationally supervised elections. A certified democratic mandate, they believed, would break Washington's ability to define foreign perceptions of their regime and give them what they openly described as an international "seal of approval" necessary to rebuild their economy and bring a permanent end to the eight-year contra war.

The weakness of the Sandinista strategy was its failure to calculate the enormous effect that the war, the economic crisis and the Sandinistas' own authoritarian use of power had already had in undermining public support for the once-popular revolutionary government. By any traditional democratic standard, Nicaragua's deep economic decline, which saw real wages drop by more than 90 percent since the revolution, could have been expected to doom an incumbent government at the ballot box. That vulnerability was then compounded by opposition to the government's unrelenting grip on all aspects of society and economic life and by fatigue with the seemingly endless specter of war.

The Sandinista leadership ascribed virtually all of those troubles to American support for the contra rebel army and the American economic embargo, then in its fifth year. That strategy was sharply and intentionally underscored when, notwithstanding a steady decline in battlefield clashes, President Daniel Ortega refused, four months before the election, to renew a ceasefire with the rebels, hoping that the emotion-laden contra issue would overshadow economic issues in the campaign.

But despite the undeniable importance of American sanctions and the war in sapping national resources and creating the bitter hardships that set the context for the vote, the government's reliance on American hostility as an explanation for the country's problems failed to persuade hundreds of thousands of Nicaraguan voters, even in the once-solid Sandinista stronghold of Managua's working class. Although a steady rhythm of small attacks and counterattacks continued in the countryside, the 18-month ceasefire and the end of direct American military aid to the contras had made the war a less immediate concern for most Nicaraguans than a nearly valueless currency and shattered economy that left many families able to afford just one meal a day. By underscoring images of confrontation, moreover, the Sandinistas' sharp nationalistic message had the effect of dramatizing Nicaragua's isolation, reminding exhausted Nicaraguans that a Sandinista victory might only result in deeper national sacrifices, and alienating youthful voters still vulnerable to the military draft.

After ten years of tight government control and surveillance, Nicaraguans were chary of revealing their true feelings to outsiders, beguiling even the most experienced poll takers, whose confident unskeptical surveys gave the world a false impression of overwhelming support for the government.

But on election day the verdict was clear and unmistakable, as voters across the country turned out in record numbers to repudiate the Sandinista regime. From the shantytowns of Managua to the war-torn contra zones in the north, even longtime Sandinista strongholds turned in landslide victories for the opposition. A foreign television team sent to report on supposedly pro-Sandinista towns in the north returned without finding even a handful of voters who had cast ballots for the incumbent regime.

In images beamed from a cavernous Managua restaurant, where her supporters gathered in an all-night celebration, there could be no doubting why Violeta Chamorro was the perfect candidate to turn the discontent of the Nicaraguan people into such a stunning electoral result. The widow of Nicaragua's most famous political martyr, Pedro Joaquín Chamorro Cardenal, Chamorro was less a product of one party than a property of the nation as a whole. With no strong identity or affiliation other than her family name, she combined the presence of an aristocrat with the acceptability of a political tabula rasa. As a silver-haired grandmother and a former member of the Sandinistas' own governing junta from 1979 to 1980, she also deprived Daniel Ortega of a clear target for either political or personal attacks, transforming his tough guerrilla image into a useless, even comical, political liability.

Even before her election victory, however, it became clear that the same qualities that made Chamorro such an effective channel for anti-Sandinista resentment had also set the stage for a far different approach to government than many of her supporters had imagined. Never strongly interested in the details of governing, Chamorro had frequently avoided questions about her economic policies during the campaign by saying that they were "secret," and in an interview denied having any knowledge of her coalition's long-debated campaign platform-ostensibly the basic document of her candidacy. In terms of her political allies, Chamorro was even more removed, depending almost entirely on a tight circle of old friends and personal advisers led by her 43-year-old son-in-law, Antonio Lacayo Oyanguren.

Although her coalition was formally made up of 14 diverse parties ranging from communists to conservatives, Chamorro and her advisers made no secret of their disdain for the traditional politicians. That attitude provoked open, at times embarrassing, schisms on the campaign trail, including a highly public shoving match between Lacayo and the chief aide to Chamorro's vice presidential candidate, Virgilio Godoy Reyes, on stage in front of a waiting campaign rally. The split then became even more pronounced when Chamorro formed her government, bypassing her coalition entirely in favor of a technocratic cabinet headed by Lacayo. Vice President Godoy, an old-school politician despised by Chamorro's group, was not granted so much as an office of his own.

From the outset of the campaign, Lacayo, an American-educated businessman who had worked successfully in partnership with the Sandinista regime, had insisted that a government led by Chamorro would not seek revenge against the outgoing Sandinista Front, but rather would try to work with it to build a new Nicaragua based on consensus and national unity. But it soon became clear that the new government intended to pursue that vision with little attention-or even advance notice-to its allies and the public.

After official transition talks in mid-March with the Sandinista military chief, General Humberto Ortega, Lacayo announced that Chamorro's government had agreed to accept continued Sandinista control of the Nicaraguan army in return for Sandinista commitments to permit an orderly transfer of government. The theoretical objective of the agreement from the new regime's point of view was to split the Sandinista Front along its most visible fault line: it yielded military power to the Sandinista faction controlled by General Humberto Ortega and his brother, former President Daniel Ortega, in return for their cooperation in removing Tomás Borge Martínez, the hard-line Sandinista police chief who had often been at odds with the Ortega brothers. But the wisdom and necessity of that trade-off was not immediately apparent to contra rebel leaders and other conservative supporters of Chamorro, who fiercely opposed the pact.

To quell that wave of conservative opposition, Lacayo pledged publicly that no other agreements or protocols that would limit the new government's power had been reached in secret. But government supporters, including the Bush administration, were outraged again when Chamorro, at Lacayo's urging, announced that she had decided to retain General Humberto Ortega as her highest military officer in a further step toward national unity.

So fierce was American opposition to that move that President Bush personally called Chamorro in an attempt to dissuade her from it, and sent senior administration officials to Managua to express Washington's deep concern. As late as the night before inauguration day, when the announcement was made, senior American officials privately asserted that the planned appointment was "impossible" and would not happen. Despite that pressure, and the loss of two would-be cabinet members who resigned to protest the decision, Chamorro would not be moved, overruling virtually her entire coalition to retain the Sandinista general.

Chamorro attempted to mollify opposition to the decision by appointing herself defense minister, thus giving herself apparent direct personal control over General Humberto Ortega's decisions. But the emptiness of that gesture was soon made clear with the publication of two new back-dated laws stripping the defense minister of most powers and making the army commander essentially invulnerable to outside control. Among other key provisions, the laws stipulated that the president could replace the army commander only with the next-highest-ranking officer in the existing Sandinista-dominated military escalon, or hierarchy, which itself was placed under the direct control of General Humberto Ortega. The laws also granted the army commander exclusive authority over everything from the allocation of the military budget to the signing of military treaties with other countries and even the establishment of private enterprises to support the army's needs.

The impact of such dramatic concessions to the Sandinista leadership was only compounded by the way the new laws were handled within the Chamorro government. Despite the important nature and broad scope of the laws, the number of government officials who were even aware of their existence was exceptionally small. At the time of the laws' publication the only government official who admitted knowledge of their content was Lacayo. When approached for comment, President Chamorro said she knew nothing about the laws, as did her minister of government, Carlos Hurtado Cabrera, whose ministry was responsible for the official legal register and who had served as Lacayo's deputy on the transition team.

Attempting to diminish the importance of the laws, Lacayo asserted that they could be altered or reversed at any time by the National Assembly, now controlled by Chamorro's coalition. But in the tense political atmosphere of Nicaragua such a suggestion could hardly be taken seriously. When anti-Sandinista deputies attempted late in the year to reduce the budget of the army by roughly 25 percent, Sandinista officers warned bluntly that the result would be "chaos and bloodshed." In perhaps the clearest glimpse yet of her regime's commitment to accommodating Sandinista power, Chamorro stepped in to veto the measure.

Officially government aides explained such concessions as an effort to seek national reconciliation and unity by working with, rather than confronting, the former Sandinista leadership. But from the beginning it was clear that the new government's actions were also based in a fundamental fear of provoking a violent upheaval by the Sandinistas, whose well-placed supporters made up in militance and organization what they lacked in popularity at the ballot box.

"It was like we were hostages," said one senior member of Chamorro's government, describing his arrival with a handful of other new officials to take charge of the Nicaraguan Foreign Ministry on inauguration day. "We were supposed to be running the place, but we were huddled together in a corner office, completely outnumbered."

Under the terms of the transition agreement Sandinista leaders dismantled the espionage apparatus of the former Interior Ministry, only to reassemble it inside the army under General Humberto Ortega's command. Although Borge left his post without incident, his chief deputy, Lenin Cerna Juarez, was quietly moved to the army, taking with him all espionage and domestic security archives and ensuring General Ortega uninterrupted intelligence capabilities that far outstripped anything available to Chamorro. Even within the remnants of the Interior Ministry, renamed the Ministry of Government, Chamorro's aides estimated late in the year that only 100 of more than 12,000 police officials and other employees had been hired by the new regime and could be counted as loyal to it.

Even before the formal transition agreement was signed in March, the Sandinista leadership made clear its intention to make full aggressive use of its hold on the government bureaucracy and labor unions to enforce its demands on the new regime. In May Sandinista-led government employees staged a dramatic week-long shutdown of government offices, winning large salary increases and humiliating the new regime. When a second strike in early July failed to draw similar results, armed Sandinista militants erected street barricades throughout Managua and regional cities, paralyzing the country. Again the government capitulated, granting sweeping concessions that went far beyond mere labor demands to include a direct Sandinista role in future government investment decisions and the gutting of Chamorro's promise to return unjustly confiscated rural lands.

At each turn the government rationalized its new concessions as the unavoidable price to be paid for keeping its hold on power. And it congratulated itself for having avoided any outright mutiny by either the army or the police.

But the opportunity for dramatic postelection changes gradually passed away. From the moment Chamorro took office, many diplomats and conservative politicians had urged her to act decisively in establishing her authority, arguing that any Sandinista revolt against her regime would be met with nearly unanimous international condemnation if not direct military intervention. Chamorro ignored that advice, advancing the somewhat contradictory thesis that the Sandinistas were both interested in true national reconciliation and too dangerous to be provoked. But by the end of 1990 there was little new evidence to support her interpretation. Chamorro and her aides had forfeited the opportunity for change and appeared to be losing ground fast.

Despite substantial new foreign aid commitments that flowed in after the elections, the new government was unable to convert its brief honeymoon with the voters into the kind of decisive economic recovery that might have broken the psychology of inflation and low investment that had gripped Nicaragua throughout the war years. Much of the new aid, which included $300 million from the United States, was siphoned off to pay costly settlements with Sandinista unions, and the impression of chaos and weak authority kept millions of dollars in other investments from ever being sent. By refusing to confront the high costs of the Sandinista military apparatus, moreover, the government effectively put the needs of its adversaries above those of its own constituents, sacrificing vital public investment in order to avoid offending a powerful Sandinista leadership that was only growing stronger in the process.

Such moves were made with the confident assumption that Chamorro's own supporters would have nowhere else to turn and that, by reaching out to the Sandinistas, the government would gradually expand its base to become the most powerful political force in the country. But the superior organization of the Sandinista supporters gave them strength far beyond their numbers. As early as May, Chamorro's own eclectic base of support began to give way, led by the former contra rebels.

Arguably responsible for forcing the elections that put Chamorro in office, the contra army found itself stranded almost immediately after the vote, which transformed the rebel force overnight from a net asset into a glaring liability for both the new president and the Bush administration. Cut off with only a handful of vague official promises of land and resettlement assistance, the contras disbanded and dispersed in early June. But after the Sandinista protests in July and what the demobilized troops viewed as the government's increasing betrayal of its original mandate, small rebel groups began to reorganize. By late in the year Chamorro was openly at war with many of her former supporters, relying on Sandinista-led troops to put down contra revolts in several rural areas, including a pre-Christmas clash that left 11 people dead in Jalapa, a battle-weary northern town that was a target and symbol of the decade-long contra war.

Perhaps the only unflinching supporter of Chamorro and her policies was the United States, which truly had nowhere else to turn. Aware that it could only worsen the situation by pushing the new president too publicly or by reviving the contra army as a serious form of political pressure, the Bush administration silently swallowed even its bitter objections to keeping General Humberto Ortega. Having lost their struggle to defeat the appointment, American officials abruptly reversed field and attempted to defend it as a demonstration of Chamorro's independence and resolve. Washington then bit its tongue and gamely stood by the fiction that Nicaraguan life was improving.

Nicaraguans themselves were under no such illusions. On the streets, hopes that the country could break its habit of violence and fraternal strife flickered lower with each new confrontation. And the sense among average citizens that they had reclaimed control over their benighted country-a proud heady feeling that was omnipresent during the elections-gave way to disillusion and despair.

III

If 1990 afforded the United States no lasting escape from its Sandinista antagonists in Nicaragua, it nevertheless started on a more optimistic note in Panama, where the first days of the year brought the final chapter in the long American confrontation with General Noriega.

Under the cover of darkness on the evening of January 3, Noriega, carrying a Bible, walked from the Vatican embassy in Panama City, where he had taken refuge, and gave himself up to American officials in a school playground next door. Searched and handcuffed by American troops, the Panamanian dictator was then transferred by helicopter to a waiting military transport plane for the flight to Miami, where he was booked and held for trial on federal drug charges.

The quiet surrender brought an abrupt end to Panama's enforced isolation from the world community and marked the culmination of the American invasion launched exactly two weeks earlier. The main work of seizing control of the country had been completed in a matter of hours after the invasion began, leaving virtually all of Noriega's key associates dead, captured or in hiding. The capture of the strongman was merely the coup de grace in a battle long since decided.

After two decades of military dictatorship, however, the simple dismantling of the old regime was not enough to bring Panama back to life. Unlike Nicaragua, where the Sandinista presence was to loom as a powerful counterweight to the Chamorro government, Panama had been effectively purged of any strong opponents to the new American-backed regime. But the act of stripping away the old regime had also eliminated the only organized institutions capable of governing, policing and administrating the affairs of the country's 2.4 million people.

Popular hatred of the Noriega regime was so strong and the application of American power so overwhelming that the invading American troops were greeted throughout the country as conquering heroes. But from the first hours of the invasion, when looters rampaged unhindered through Panama City's main shopping district, the issue was not whether the United States could depose the old regime, but whether it could effectively replace it.

In the countryside, where Noriega's military had exercised absolute control, young American soldiers became instant arbiters of political character, appointing new mayors and town officials on the basis of snap interviews with bewildered, if delighted, civilian volunteers. Even in towns where those choices succeeded in restoring political stability, the lack of management or administrative ability turned local government into a quagmire of inefficiency and often corruption.

Nowhere was the lack of reliable allies more conspicuous than on the Panamanian-Costa Rican border, where as late as a month after the invasion vital customs and immigration matters remained under the control of a purported anti-Noriega guerrilla group that appeared as if by magic on the day of the American invasion. The group's colorful leader, a self-described Panamanian millionaire, asserted that his 150 heavily armed men, who worked in close coordination with American Special Forces nearby, were Panamanians who had fought a long guerrilla campaign against their country's dictator. But under closer questioning, he acknowledged that the men were based in hotels rather than a jungle bivouac and also admitted that nearly half of the men were not Panamanians at all, but rather Nicaraguans "on loan" from the contra rebel army.

At the national level in Panama City, the United States had pliant ready-made allies in the trio of opposition politicians who had united against Noriega for presidential elections in May 1989. Widely considered the true victors in that vote were Endara, Ricardo Arias Calderón and Guillermo Ford. They were brought on the night of the invasion to an American air base, where they swore themselves in and assumed formal control of the new government.

But with no clear mandate or common ground to unite their parties in the absence of their now-vanquished enemy, the three quickly fell into a pattern of infighting and advantage-seeking that sharply distorted the development of their new regime. Their bickering was only amplified by the impatience and unhappiness of a public that had never had a clear opportunity to choose among their relative policies.

The Panamanian economy began to rebound by the end of the year, recovering much of the decline it had suffered from American sanctions during Noriega's last years in power. But even government supporters acknowledged that the recovery was less a product of official policies than the fruit of eager investments by Panama's private businessmen, looking to regain their markets after years of politically related paralysis.

In those areas where the government had clear responsibility, the picture was far bleaker, reflecting the divisions and inefficiency of a regime that could scarcely have functioned without the daily advice and guidance it received from American military and civilian support teams. In the urban areas of Panama City and Colón, common crime soared, prompting even many white-collar professionals to carry guns or other weapons when venturing out of their homes. Despite joint American-Panamanian police patrols conducted until late November, criminals carried out increasingly bold thefts and armed robberies, including brazen assaults on crowded restaurants, such as one just half a block from the U.S. embassy where American officials were robbed at gunpoint during dinner in mid-October.

Even more disturbing on a broader level was the noticeable return of drug trafficking to the remote jungles and ragged coastline that had long made Panama a smuggler's paradise. Interrupted by the American invasion, drug smugglers returned to find that the tight control the Noriega regime had exercised over Panama's hinterlands had been broken, with no new authority to take its place. According to pilots and dock workers the level of illegal trafficking by midyear was equal to or greater than that of the final period before the invasion, which had been justified partly as an attempt to crack the regional drug network.

Part of the problem of law enforcement was attributable to the conscious demilitarization of the restructured police apparatus, the Panamanian Public Force. That laudable effort did little to reassure the Panamanian man in the street, and even the government's poor record in deterring or catching criminals was better than its record for processing them after arrest. Left with virtually no reliable judges and a backlog of cases both old and new, the new regime quickly reached a point of criminal justice gridlock. By year's end, the government had more than 17,000 criminal cases pending, yet had not held a single major criminal trial since the invasion. The country's aging jails teemed with inmates, 80 percent of whom were detainees still awaiting trial, and prison escapes and violence reached epidemic proportions.

Panamanians laid much of the blame for their new government's sluggishness and ineffectiveness on inadequacies in the size and speed of American aid to Panama. In March President Endara went on a hunger strike in a rocking chair at Panama City's main cathedral to dramatize the plight of Panama's poor during delays in congressional approval of $420 million in aid recommended by the Bush administration. It became fashionable for Panamanians to tell American visitors that the scheduled aid was not aid at all, but "reparations" due to Panama as compensation for the impact of American sanctions against Noriega.

As the shock of the invasion began to wear off, the government and business sectors also began to demonstrate increasing resentment of American demands on the new regime, particularly the prickly issue of a proposed mutual legal assistance agreement designed to grant American investigators freer access to the Panamanian bank records of suspected money launderers and tax evaders. To the outrage of many American officials, Endara's foreign minister denounced the proposed agreement as a violation of Panamanian sovereignty that would destroy the country's role as an international banking haven.

But with little source of visible support other than the United States, Endara's government could scarcely afford to enter into a full-scale dispute with its American benefactors. At year's end the depth of that dependency was underscored dramatically when Endara's former police chief, Colonel Eduardo Herrera Hassan, who had been jailed for insubordination and inciting a coup attempt, escaped and staged an abortive protest with other disgruntled police in Panama City's police headquarters. While Endara remained out of sight, more than 500 American troops surrounded the building, forcing Colonel Herrera into eventual surrender. After 12 frustrating months, 1990 ended in Panama much as it had begun, with the United States using its military power to give Panamanian democracy the chance to put down new, hopefully firmer, roots.

IV

With such complex political legacies and unrestrained appetites for new U.S. aid, neither Nicaragua nor Panama could finally be mistaken for the American success stories that they had appeared to be early in the year.

Even more important was the far-reaching impact that events in both countries, combined with the collapse of the Soviet empire in Europe, had on the broader foundation of American strategy toward Latin America as a whole. By eliminating key elements of recent American demonology in the region, the developments in Nicaragua, Panama and the Soviet bloc effectively shattered the interpretive lens through which the United States viewed Latin America.

Washington's crusades against communism, the Sandinista regime and, in the later stages of Noriega's regime, drug trafficking had never been sufficient to explain or understand the complex conflicts confronting U.S. policy in Latin America. But the urgency, simplicity and apparent importance of those campaigns had allowed U.S. policymakers to rely on them as a substitute for more difficult judgments about the merits of the region's problems. For more than a decade, concerns over human rights had been subordinated to geopolitics; social justice had taken second place to mighty clashes of ideology. Now, however, grand strategy had suddenly given way and the blunt battle of us versus them was abruptly replaced with a myriad of detailed judgments: who was right, who was wrong-and should we be involved at all?

The most conspicuous target for a rethinking of past policies was El Salvador, where a perceived last stand against communism had set the United States up as trainer and quartermaster to one of the most demonstrably bloodthirsty regimes in the hemisphere, at a cost that dwarfed American aid programs to far larger, more civilized friends. Without a threat from nearby Nicaragua was there any strategic interest in El Salvador that could justify making it the object of one of the largest American military and diplomatic missions in the world?

The new dilemmas for American policy also stood out in sharp relief in much of the rest of the region, where crucial judgments of development strategy, military aid, commercial relationships and other issues awaited integration into a new analytical framework that Washington had yet to define.

The Bush administration announced plans to lower trade barriers throughout Latin America and to negotiate a free-trade agreement with President Carlos Salinas de Gortari of Mexico. But even in Mexico, where economic issues are inextricably intertwined with the political monopoly of Salinas' ruling party, those agreements were pursued in isolation from their political context. No effort was made to fit them into a broader concept of social development.

With no wider vision the United States thus returned to Latin America from the Cold War unprepared to absorb or interpret trends in regional affairs. Washington's policymakers appeared content to sit back and enjoy the fact that for the first time in decades regional nations were lining up for America's blessing. With no clear new course in the fast-changing tides of Latin American politics, however, Washington found that even the symbols of its new power could be turned into a source of confusion and unwelcome political irony.

On July 4, 1990, the U.S. embassy in Managua celebrated with the most elaborate official American party the city had seen since 1979, seemingly reveling in the accession of Chamorro's government. The site of the 1,800-guest party, the former American ambassador's residence, covers an entire hilltop in central Managua and was considered so embarrassingly extravagant that it had not been used as a full-time ambassadorial residence since the Sandinista revolution. But it provided the backdrop for a celebration that included a U.S. Army band, a full-dress Marine honor guard and more uniformed American military officers than the city had seen since the start of the contra war.

The value of the moment was not lost on General Humberto Ortega, who turned the tables on Chamorro's pro-American supporters by requesting, and receiving, his first invitation to such an event. As a U.S. Army drummer beat a martial cadence for the presentation of the stars and stripes and Marine Corps flag, General Ortega and other uniformed commanders of the Sandinista army watched from the formal doorway of the mansion. The U.S. national anthem blared from the hilltop party across the surrounding shantytowns of Managua. Then, confidently, General Ortega raised his hands in applause.

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